Why Risk Management System Plays Important Role In Trading?

 

Why Risk Management System Plays Important Role In Trading ?

By – Inncome India Academy

Do You Know Why Most Of The Beginners Loose Their Entire Capital ? Let’s Understand This Today -:

 

Yes, This is true that maximum number of beginners Loose Their Entire Capital in their initial times. there are many reasons but the main reason of blowing their account is Poor Risk Management.

A beginner start his journey in the market by thinking that it is very easy and he can compound his money very easily here. and start trading without getting any knowledge about trading (Which is called GAMBLING).

 And after loosing their entire capital they think that the trading is very risky and start blaming the market. But here you need you understand that trading without any knowledge is making you looser, Blaming Market Will Not Make You Win.

No matter how much good trader you are and how much accurate strategies you have if you haven’t Mastered Managing Your Risks You Can’t Win Here.

 

IMPORTANCE OF RISK MANAGEMENT -:

Risk management plays a key role in Stock Market, Because a Trader who have mastered Risk Management and have winning percent of  only 30%  can easily beat a pro trader who haven’t mastered risk management and have a winning percentage of 70%. 

And  that’s the reason if you want t minimize the risk as much as possible, you have to master in managing risks in trading. Otherwise you can’t become a profitable trader.

Having Strict Rules and a good trading plan in trading will help you to become a consistent profitable trader.

HOW TO MASTER RISK MANAGEMENT SYSTEM ? 

There are some rules a beinners should follow to master managing risks which are -:

 

• Use Stoploss Everytime

A stop-loss order is a buy/sell order placed to limit the losses when you fear that the prices may move against your trade. For instance, if you have bought a stock at Rs 100 and you want to limit the loss at 95, you can place an order in the system to sell the stock as soon as the stock comes to 95. Such an order is called ‘Stop Loss’, as you are placing it to stop a loss more than what you are ready to risk.

 Stoploss allows you to protect your trades from unexpected market movements.

• Set Risk Limits Of A Day

Set the limit of the Risk You will take per trade and Risk Limit of a whole day. Let me help you with a good Example -:

(Let’s Assume You Have 1 Lakh Trading Capital)

1. You WIll Not Risk More Than 1 % In A SIngle Trade (Risk =1000)
2. You  Need To ShutYou Pc Down If You Loose More Than 3 % In A Single Day (3*1000 = 3000)
3. Above 2 Rules Are Priority Which Means You Can Take 3 Trades Per Day Not More Than That.

(If you have the Capital you canmake money another day. so prioritize your capital first in market rather than making money.) 

 

• KNOW YOUR EXITS BEFORE ENTRY

While entering into any trade you should always think about minimizing your losses first. For that you have to make a Trading Plan of Entries and Exits According To your strategy , Which help you you manage your risks properly and keep you emotions aside while trading.